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United States ex rel. Rector v. Bon Secours Richmond Health Corp.

United States District Court, E.D. Virginia, Richmond Division

April 14, 2014

UNITED STATES ex rel. JOHN RECTOR, et al., Plaintiffs,
v.
BON SECOURS RICHMOND HEALTH CORPORATION, et al., Defendants.

MEMORANDUM OPINION

JAMES R. SPENCER, Senior District Judge.

THIS MATTER is before the Court on a Motion to Dismiss Relator John Rector's ("Rector" or "Relator") Second Amended Complaint pursuant to Federal Rule of Civil Procedure 12(b)(6) filed by Defendants Bon Secours Health System, Incorporated, Bon Secours Richmond, LLC, Bon Secours Hampton Roads Health Systems, Incorporated ("BS Hampton"), Bon Secours Richmond Health System ("BS Richmond"), Bon Secours Hampton Roads, Bon Secours Richmond Health Corporation, Bon Secours Virginia, and John Doe Corporations 1-10 (collectively, "Named Defendants" or "Bon Secours"). (ECF No. 75.) For the reasons that follow, the Court will GRANT Defendants' Motion and DISMISS Relator's Second Amended Complaint WITHOUT PREJUDICE.

I. BACKGROUND[1]

A. The "Concierge Program"

1. Generally

In or about 2006, Bon Secours implemented a program to provide concierge services to BS Richmond-affiliated and non-affiliated physicians in exchange for obtaining patient referrals to Bon Secours facilities ("Concierge Program"). Specifically, since at least 2006, BS Richmond provided such services to participating physicians through the concierge department of its shared services division. Since at least 2009, BS Hampton has also provided such services. BS Richmond is affiliated with St. Mary's Hospital (Richmond, VA), Memorial Regional Medical Center (Mechanicsville, VA), Richmond Community Hospital (Richmond, VA), St. Francis Medical Center (Midlothian, VA), and the Heart Institute at Reynolds Crossing (Richmond, VA). BS Richmond is also affiliated with several imaging centers-St. Mary's Hospital, Memorial Regional Medical Center, St. Francis Medical Center, Richmond Community Hospital, Bon Secours Imaging Center Reynolds Crossing, Laburnum Diagnostic Imaging Center and St. Francis Imaging Center-and with the Bon Secours Medical Group, comprising approximately 200 affiliated physicians. BS Hampton is affiliated with DePaul Medical Center (Norfolk, VA), Harbour View Health Center (Suffolk, VA), Mary Immaculate Hospital (Newport News, VA), Maryview Medical Center (Portsmouth, VA), Bon Secours Health Center at Virginia Beach (Virginia Beach, VA), and three assisted living residences, located in Norfolk and Portsmouth, Virginia and in St. Petersburg, Florida (collectively, "Bon Secours Facilities").

Through the Concierge Program, patient-physician practice liaisons ("Concierges") were hired by Bon Secours to provide a wide array of services to physicians who referred their patients to Bon Secours for diagnostic tests. Bon Secours's Concierge Program was designed to alleviate personnel and financial burdens on referring physicians' offices by scheduling patients, obtaining insurance pre-authorizations, communicating with patients and testing facilities, collecting patient co-payments and deductible payments, and performing additional tasks on behalf of the referring physicians upon request.

2. Coding by Concierges

Rector reports that approximately eighty percent of participating physicians failed to submit complete forms to the Concierge Program. Concierges were instructed to assign International Statistical Classification of Diseases and Related Health Problems, 9th Revision ("ICD-9") codes and related Current Procedural Terminology ("CPT") codes. Concierges were not licensed medical professionals authorized to diagnose patients or select appropriate procedures. As such, in determining patient diagnoses, the Concierges were instructed to use internal manuals and "cheat sheets" created by Bon Secours managers that list only those ICD-9 codes and related CPT codes for those diagnoses and procedures that are covered by Medicare, Medicaid, or other insurance plans. Managers repeatedly instructed Concierges to never reveal the existence of these manuals or "cheat sheets" to insurers or physicians' offices. Concierges selected from these codes in order to ensure that patient procedures or administered tests were coverable by relevant third-party payers or insurance programs. Further, Bon Secours's concierge computer system "red lighted" any orders with codes not covered by patient insurers. (Second Am. Compl. ¶ 16). Bon Secours steered patients to testing or procedures based on revenue determinants by instructing Concierges to change the "red lighted" patient orders into ones that were covered for payment before they were "green lighted" for submission. ( Id. ). Lastly, Concierges were instructed by Bon Secours managers to refer participating physicians' patients to Bon Secours facilities regardless of whether or not those facilities were in a patient's insurance network.

If an affiliated physician failed to sign an order for diagnostic testing or therapeutic procedures, or if an unauthorized person signed a patient form or ordered a procedure without submitting an order form and the physician's signature could not be expeditiously obtained, Bon Secours directed its Concierges to cut and paste physicians' signatures from past orders ("Cut and Paste Practice"). Bon Secours managers were well aware of this practice, and Rector was trained to engage in this conduct by Bon Secours employees. The practice continued even after Relator and other Concierges raised questions and concerns about it. Bon Secours also systematically completed missing portions of physicians' orders and other documentation that physicians' offices are required to complete. If information was missing or unclear in documentation, Concierges were instructed by Bon Secours's management not to call physicians' offices but, instead, to call patients, falsely identify themselves as calling from the physicians' offices, and attempt to determine the proper diagnosis and procedure ordered. Further, Bon Secours's management directed diagnostic lab personnel to call their Concierges with questions, including questions about diagnoses, procedures, and medication instead of calling physicians' offices. Bon Secours management directed the Concierges not to provide any services in connection with patients who expressed a preference to have their tests done at a non-Bon Secours facility. Further, Concierges were instructed to inform physician's staff that they would need to handle their own scheduling and paperwork if a patient went to a non-Bon Secours facility.

3. "On-Site" Concierges

The Concierge Program included Concierges who sat in a centralized location at Bon Secours facilities and communicated by phone, fax, and over the computer ("Virtual Concierges") and those whom Bon Secours assigned to work in the actual offices of select medical practices ("On-site Concierges"). Relator represents that BS Richmond employs approximately thirty Concierges, the majority of whom are located at a central processing center at 8580 Magellan Parkway in Richmond, Virginia. Relator further represents that approximately eight to ten of the BS Richmond Concierges are On-site Concierges assigned to work full-time in "high-volume" referring physicians' offices and/or those with high potential. ( Id. ¶ 19). Relator estimates that these thirty Concierges process fifteen patients per day for a total of approximately 450 patients per day throughout the BS Richmond concierge department. Relator estimates that the average claim processed by Bon Secours Concierges is approximately $1, 000.00. Rector reports that, on multiple occasions, additional Concierges were hired by a concierge manger, Wade Williams, after being approved by "the Chief Financial Officer and the Chief Executive Officer." ( Id. ¶ 87). Bon Secours estimated that each additional Concierge would result in a twenty-three percent increase in referrals and, in one case, even stated that placing an On-site Concierge would enable Bon Secours to control referrals to Memorial Regional Medical Center, a Bon Secours-owned hospital in Richmond.

On-site Concierges provided numerous services that would otherwise be performed by paid physicians' staff. "Bon Secours intended that the On-site Concierges would network and align themselves as a part of the [physician's] office team providing direct feedback from physicians, patients and staff [and providing] immediate results to the physicians." ( Id. ¶ 95) (internal quotation marks omitted). Relator reports that On-site Concierges had the effect of decreasing the overhead of physicians' offices to the point where physicians were able to lay off employees. Specifically, Grove Family Practice and West End Internal terminated employees for this reason. Bon Secours provided these free services solely to physicians who referred patients to facilities owned by, or affiliated with, Bon Secours.

4. Benefit to Bon Secours

Bon Secours's management tracks how many physicians and medical practices enroll with the program, compares how many patients they refer to Bon Secours labs, and calculates the profitability of the program. Bon Secours's internal financial records tracked the monetary value of physician referrals from the Concierge Program for each year and included projections of revenue associated with the Concierge Program for each year. Williams stated that physician participation in the Concierge Program has expanded since he started with the program in 2007 and that Bon Secours was able to use the program to "gain market share in the community." ( Id. ¶¶ 100-01). "[A]pproximately 50% of patients referred through the BS Richmond Concierge department to Bon Secours's diagnostic and therapeutic facilities are Medicare beneficiaries, and approximately 25% of those patients are Medicaid beneficiaries." ( Id. ¶ 20). An August 2008 internal presentation prepared by the, then, Vice President for Planning and Marketing for Bon Secours, Michael A. Spine, reported that Bon Secours increased its referral business an average of 23% as a direct result of the Concierge Program and touted a 48% return-on-investment, with the Concierge Program generating nearly six million in income over the previous year.

5.Billing the Federal Government

Relator represents that the BS Richmond Concierge department bills approximately $120, 000, 000.00 per year in medical claims, of which 80% are based on unsubstantiated or unsupported medical diagnoses, and 100% of which are the result of arrangements between referring physicians and Bon Secours pursuant to the Concierge Program. ( Id. ¶ 132). Relator estimates that "approximately 50% of patients referred through the Bon Secours Concierge department to Bon Secours diagnostic and therapeutic facilities are Medicare beneficiaries and approximately 25% of those patients are Medicaid beneficiaries, resulting in damages to the Government of approximately $90, 000, 000.00 per year since 2006." ( Id. ¶ 133).

B. Relator's Role

In August 2007, BS Richmond hired Rector through a temporary employment agency to work as a part-time Concierge for BS Richmond's Shared Services Division. (Second Am. Compl. ¶ 32). Rector had no prior health care experience, training, or education. Rector began his full-time employment at BS Richmond in November of 2007. As a Concierge, Rector completed, submitted, and obtained authorization for diagnostic testing and therapeutic procedures, scheduled patient appointments, followed up with patients after their appointments, and collected co-payments and deductible payments for services being rendered.

Concierges, including Rector, maintained lists of patients referred by participating physicians that indicated each patient's insurance coverage, including Medicare and Medicaid beneficiaries. Rector and other Concierges also kept a log of patients whose diagnostic testing they handled. These logs indicated the identity of the referring physician or practice group, as well as the patient's type of insurance coverage. Relator's log from January/February 2008 showed that Medicaid and Medicare-covered patients were referred to Bon Secours facilities by physicians participating in the Concierge Program. (Second Am. Compl. Ex. A). The patient log consists of a spreadsheet including, but not limited to, patient names and social security numbers, types of procedures scheduled, scheduled dates of procedures, actual dates and times of procedures, facilities in which procedures were completed, the names of referring physician and their practices, and the insurance of the patients. ( Id. )

In or about May or July of 2008, Williams introduced Relator as a potential On-site Concierge for Richmond Gastroenterology Associates at St. Mary's Hospital. During the visit, Richmond Surgical Group's office manager told Relator that he might be needed to answer phones during his lunch hour and to perform office tasks for the medical group. In response, Williams told Rector that Bon Secours would approve of the practice if he would be willing to give up his lunch hour. BS Richmond later offered him the position, along with a ninety cent per hour raise. Relator, however, declined the position.

In late November and December of 2009, Rector documented three orders from a medical group, Grove Avenue Family Practice in Richmond, Virginia, on which he selected codes from the BS Richmond manual and cheat sheets because no ICD-9 codes had been provided. Relator also completed an order from PartnerMD, a medical practice with an office in Richmond, Virginia. There, Rector "coded" an order for an MRI received by PartnerMD by contacting a patient, discussing the patient's diagnosis and, in consultation with other Bon Secours Concierges in the workspace that day, locating a billable ICD-9 code pursuant to which Bon Secours could obtain reimbursement. Last, Rector represents that on a number of occasions he was told by Bon Secours radiologists to "simply use his own discretion in determining whether or not a ...


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